Credit ratings agency Fitch Ratings said that a study of 308 U.S. companies showed that capital expenditures would rise by an average of 3.1% this year as against 2009, reflecting a stabilizing economic conditions.

In a report published Wednesday, Fitch Ratings said it does not expect capital expenditure to rise rapidly in response to economic stabilization, and expects 2011 capital expenditure to increase at a modest rate of 1.4% versus 2010.

Due to difficult economic conditions in 2009, capital expenditures fell for the U.S. corporate sector. The macroeconomic stresses of the past year caused companies to continue to focus their financial strategies on building financial flexibility. In many cases this financial flexibility was achieved by maximizing FCF, primarily by reducing capital expenditures. Fitch has reviewed the capital expenditure levels for 308 companies in the U.S. Corporate sector.

The key conclusions from this study include:

  • Capital expenditures for this sample fell by 16.6% in 2009 compared to 2008. Fitch believes that aggregate capital expenditures for this 308-company sample will increase approximately 3.1% in 2010 versus 2009, reflecting the stabilizing of economic conditions. However, Fitch does not expect capital expenditures to rise rapidly in response to the economic stabilization, and expects 2011 capital expenditures to increase again at a modest rate of 1.4% versus 2010.
  • Aggregate capital expenditure totals can be greatly influenced by a relatively small number of companies. The 10 largest U.S. Corporate companies defined by capital expenditure in 2009 represented approximately 40% of the aggregate total for this 308-company sample.
  • Due to the influence on the aggregates by a small number of companies, it is useful to measure capital intensity as capital expenditures divided by revenue. Capital expenditure intensity for this company sample was 5.2% in 2009. Fitch forecasts that capital expenditure intensity will be 5.2% and 5.0% in 2010 and 2011, respectively. This forecast reflects that in a slowly recovering demand scenario, companies will look to use excess capacity before making material new capital expenditure investments for the future.
  • Fitch notes that in this 308-company sample for U.S. Corporate, non-investment grade companies cut capital expenditures by approximately 25% in 2009, versus investment grade companies cutting by approximately 16%. Fitch believes this difference reflects the variances in financial flexibility and confidence in market access of these different rating categories.